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Running Head: ACCOUNTING
1. Pension Accounting
Private Pension Plan: A private pension plan is an employer-sponsored retirement plan
designed to optimize employee benefits. It means offering employees financial support during
retirement through fund accumulation over work years (Naughton, 2019). The different shapes of
private pension plans include defined benefit and contribution plans. Contributory vs.
Noncontributory Plan: Employees and the employer contribute to the plan in a contributory
pension arrangement. An employer-funded plan with no employee contributions is
noncontributory (Naughton, 2019).
Accounting for the Employer vs. Accounting for the Pension Fund: Accounting involves
recording pension-related expenses and obligations on financial statements for companies
(Naughton, 2019). Financial activities and reporting regarding the pension trust or fund fall
under accounting for the pension fund.
Funded: Funding means that there are plan assets in the pension trust to cover future
pension obligations. Examples of assets are stocks and bonds. Pension Liability: To employees,
the company owes the responsibility of paying future pension benefits, which is pension liability
(Naughton, 2019). Unfunded pension liabilities arise when a plan does not have enough assets to
cover all its obligations.
Accrual Recognition of Pension Costs: Accrual recognition of pension costs is supported
by theoretical …
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